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The total energy consumption in the OECD economies is expected to continue to witness a decreased growth in 2009. However, with the global economy expected to recover in 2010, energy consumption in the OECD economies is expected to grow. The improving economic conditions in 2009 and the expected recovery in 2010 will further drive the growth in energy consumption in these economies.
Mergers in Exploration, production to rise
The uncertainty in the global economic outlook, highly volatile commodity prices and tight credit availability had a negative effect on the deal activity thereby decreasing the deal activity in the later part of 2008. Since then, the commodity prices have been increasing and the global economy is showing some signs of recovery from the recession. Global economy is expected to grow at a positive rate in 2010. These factors and comparatively lower asset valuations is expected to usher a new wave of merger and acquisition in the upstream oil and gas industry by the end of 2010.
Crude oil to rise, Capex to rise in 2010
Capital expenditure of oil and gas companies after surging from 2007 to 2008 has witnessed a significant decrease in 2009. However, in 2010 capital expenditure activity is expected to go up, driven mainly by large National Oil Companies.
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With oil prices starting to stabilize at $60-80 per barrel level and as the economic intervention by the governments across the globe takes effect, oil and gas companies are expected to increase investments in 2010. However, these plans of 2010 and beyond are largely dependent on the commodity prices, demand-supply and reduced costs of oil services.
Power consumption to rise
Global electricity generation is expected to continue to increase in the years to come. In 2008, 19.53 Trillion KWh of electricity was generated. Worldwide electricity generation is expected to increase to 20.26 Trillion KWh in 2009 and further to 21.0 Trillion KWh in 2010. The growth in the electricity generation can be attributed to increase in the population and economic growth in the emerging economies and a corresponding increase in the usage of electricity for residential, commercial as well as industrial purposes.
Nuclear Energy to have increased role
The global economic downturn is likely to have limited effect on the nuclear industry due to the long term nature of the nuclear projects. Further, with the long term nuclear plans of a number of emerging countries and the recent trend toward small and medium reactors, the nuclear industry might witness an increase in investments once the global economy recovers in 2010.
Alternative energy to attract investments
The need to achieve energy stability, security of energy supply and energy independence combined with the demand to minimize carbon footprints is driving countries across the world to explore different renewable energy technologies. Battling climate change is as much a concern for most world governments as achieving energy independence and security. This has forced governments to come up with schemes and policy frameworks supporting the promotion and development of renewable energy. With the global economy expected to be in a better shape in 2010, the renewable energy industry is expected to continue to grow.
Refining sector experience downturn
The global refining industry is witnessing a slump following the global economic downturn after a high return period in the past few years. Uncertain product demand due to the global economic downturn, decreasing refinery margins and a surplus refining capacity are having a combined negative effect on the profitability of refining operations. These trends will continue to cast a shadow of uncertainty over the future of refinery margins thereby making the refining sector unattractive for the integrated oil companies in the short term.
New And Emerging Frontiers Will Increasingly Add To The Supply Of Oil And Gas In 2010
Unconventional oil and gas projects are attracting increased attention in the wake of the inevitable production decline in the more traditional oil and gas resources and the volatility in the oil market. The expected recovery of the global economy in 2010 and the rise in the commodity prices will increase the attractiveness of the unconventional and offshore oil and gas sectors. Consequently, the share of oil and gas production from unconventional as well as offshore resources will continue to increase in 2010.
Climate Change policies
In order for the industry to comply with the climate change policies, significant costs need to be incurred by the energy companies. Also, the companies would have to eventually diversify into clean energy sources. Nonetheless, the global economies are not even in the initial stages of agreeing to a global climate policy which would enforce emission cuts. This has created a lot of uncertainty on the effect of the policy measures on the energy industry.
Coal to dominate
The global economic slowdown is expected to have very little effect on the consumption and production of coal. The popularity of coal can be attributed to its huge availability and lower costs as compared to natural gas and oil. In recent years, there has been a greater shift towards nuclear and other cleaner sources of energy to reduce the dependence on fossil fuels, especially coal. Nevertheless coal is expected to be the preferred choice for years to come. (Businesswire)
